<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
_____
FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1997
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants in Sun Life of Canada (U.S.) Variable Account B and the
Board of Directors of Sun Life Assurance Company of Canada (U.S.):
We have audited the accompanying statement of condition of Sun Life of Canada
(U.S.) Variable Account B as of December 31, 1997 and the related statement of
operations for the year then ended and the statements of changes in net assets
for the years ended December 31, 1997 and 1996. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation with the custodian of securities held for the Variable
Account as of December 31, 1997. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sun Life of Canada (U.S.) Variable Account B
as of December 31, 1997, and the results of its operations for the year then
ended and the changes in its net assets for the years ended December 31, 1997
and 1996 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
February 6, 1998
<PAGE>
Sun Life of Canada (U.S.)
Variable Account B
Statement of Condition
December 31, 1997
<TABLE>
<S> <C>
Assets:
Investment in MFS/Sun Life Series Trust:
Money Market Series ("MMS"),
314,456 shares at $1.00 per share
(cost $314,456) $ 314,456
Liability:
Payable to sponsor (71,919)
--------
Net Assets $ 242,537
-------
Applicable to Owners of Variable Annuity Contracts:
Deferred contracts (61,811 units at
$3.06048 per unit) $ 189,172
Reserve for variable annuities 53,365
------
$ 242,537
-------
</TABLE>
See notes to financial statements.
<PAGE>
Sun Life of Canada (U.S.)
Variable Account B
Statement of Operations
Year Ended December 31, 1997
<TABLE>
<S> <C>
Investment Income:
Dividends $ 16,144
Expense:
Mortality and expense risk charges 3,236
-----
Net Investment Income $ 12,908
------
</TABLE>
See notes to financial statements.
<PAGE>
Sun Life of Canada (U.S.)
Variable Account B
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996
<S> <C> <C>
Operations:
Net investment income $ 12,908 $ 24,461
Net realized losses 0 (282,229)
Net unrealized gains 0 268,284
------ -------
Net increase in net assets
from operations 12,908 10,516
------ ------
Participant Transactions:
Net accumulation activity:
Redemptions (20,138) (20,633)
-------- --------
Annuitization activity:
Annuity payments (15,454) (13,974)
Actuarial adjustment 1,602 (12,378)
----- --------
Net annuitization activity (13,852) (26,352)
-------- --------
Net decrease in net assets from
participant activity (33,990) (46,985)
-------- --------
Net Decrease in Net Assets (21,082) (36,469)
Net Assets
Beginning of year 263,619 300,088
End of year $ 242,537 $ 263,619
------- -------
</TABLE>
See notes to financial statements.
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Sun Life of Canada (U.S.) Variable Account B (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.) (the
"Sponsor") was established as a funding vehicle for individual variable
annuities. The Variable Account is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a unit
investment trust. The operations of the Variable Account are part of the
operations of the Sponsor and are not taxed separately; the Variable
Account is not taxed as a regulated investment company. The Sponsor
qualifies for the federal income tax treatment granted to life insurance
companies under Subchapter L of the Internal Revenue Code. Under existing
federal tax law, investment income and capital gains of the Variable
Account are not taxable and, therefore, no provision has been made for
federal income taxes.
2. INVESTMENT VALUATIONS:
At December 31, 1995, the Variable Account was fully invested in shares of
Sun Growth Variable Annuity Fund, Inc. ("SGVA"), an affiliated mutual fund.
During 1996, SGVA ceased operations. The Variable Account redeemed all
shares of SGVA in 1996. At December 31, 1997 the Variable Account is fully
invested in shares of MFS/Sun Life Series Trust, Money Market Series
("MMS"). Investment in shares of MMS are recorded at their net asset
value. Realized gains and losses on sales of SGVA and MMS are determined
on the identified cost basis. Dividend income and capital gain
distributions received by MMS are reinvested in additional shares of MMS
and are recognized on the ex-dividend date.
3. MORTALITY AND EXPENSES RISK CHARGES:
A deduction based on the value of either the variable accumulation units
credited to a deferred contract's accumulation account or the annuity units
credited to either an immediate or a deferred contract, as the case may be,
is made by the Sponsor from the Variable Account at the end of each
valuation period for the mortality and expense risks assumed by the
Sponsor. These deductions are transferred periodically to the Sponsor.
Currently, the deduction is at an effective annual rate of 1.0% of the
respective values.
4. RESERVE FOR VARIABLE ANNUITIES:
The reserve for variable annuities (contracts in payment period) has been
calculated using the Progressive Annuity Table (for year of birth 1900)
with interest equal to the assumed interest rate used in determining the
annuity units and the annuity unit values. Separate
<PAGE>
SUN LIFE OF CANADA (U.S.)
VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
tables were used for male and female annuitants. Required adjustments to
the reserve will be accomplished by transfers to or from the Sponsor.
5. ESTABLISHMENT OF NEW VARIABLE ACCOUNTS:
During 1982, the Sponsor established other separate accounts as investment
vehicles for qualified and non-qualified individual variable annuity
contracts and no longer accepts applications for new annuity contracts
participating in Variable Account B.
6. CHANGE IN ACCUMULATION UNITS OUTSTANDING:
<TABLE>
<CAPTION>
Years Ended
December 31,
1997 1996
---- ----
<S> <C> <C>
Redeemed during the year (7,675) (6,835)
Units outstanding:
Beginning of year 69,486 76,321
------ ------
End of year 61,811 69,486
------ ------
------ ------
</TABLE>
